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	What is Warrant ? A warrant is a financial instrument issued by a bank or a financial institution. Warrants may be issued over a range of underlying assets, including domestic & international shares, baskets of shares, or indexes. A range of factors including the current price or level of the underlying share, and the time left until the warrant expires affects the price of a warrant. Types of Warrants A call warrant is the right to buy a share at a predetermined price. Rather than taking the risk of buying the shares directly, you can buy a share through a Call Warrant. With trading call warrant you profit when the price of the underlying asset rises with call warrants. A put warrant is a symmetric effect to a call warrants. The profits are related to the share price falling rather than rising. With trading put warrants you may also profit when the price of the underlying shares falls. Call Spread Warrant is a type of warrant that provide a low premium and less time decay. In this approach you buy an option with a lower striking price and sell one with a higher striking price at the same time. Put Spread Warrant is a symmetric effect to a call spread. In this approach you buy an option with a higher strike and sell one with a lower strike price at the same time. Asian Warrant provides a payoff based on the average asset price during the life of the warrant. For example, an average-price call provides a payoff equal to the greater of zero and the amount by which the average price of the asset exceeds the strike price. Why Trade Warrants ? Warrants offer some degree of leverage or gearing, meaning that small percentage changes in the value of the underlying instrument result in larger percentage changes in the value of the warrant. This is because you gain exposure to the fluctuation of the underlying share price for a smaller monetary outlay than buying the shares. There are certain risks involved in trading warrants. These include a warrant has a limited life. At expiry, trading in the warrant stops, and the warrant ceases to exist. This means that for you to make a profit from a warrant, your market views have to be realized within the life of the warrant. As time passes, the opportunities for your warrant to become profitable decrease, and the warrant's time value declines. This erosion of time value is called time decay. Time decay accelerates as the expiry of the warrant nears. . Another advantage of trading Warrants is that it is typically costs less than trading the underlying shares. Currently no stamp duty is payable on the purchase or sale of cash settled Warrants and brokerage and interest costs are reduced because the price of Warrants is usually less than the underlying share price. Please contact our Derivatives & Structured Products Department at (852) 2287-8559 for more details.
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